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Pennsylvania employers could face a 6 percent increase in workers compensation costs later this year. Employers may also witness a spike in claims formerly capped by Impairment Review Evaluations, as well as the possibility of past claims being reopened.

This increase in the PA workers compensation insurance rate – the steepest rise recorded in the past quarter century – results from a recent Supreme Court ruling invalidating the use of Impairment Review Evaluations (IREs). These evaluations had allowed companies to cap costs for paying out wages lost due to worker injury. Established by law in 1996, they are typically used in the infrequent cases of people who can’t or won’t go back to work two years after sustaining an injury.

The National Federation of Independent Business states the ruling will eliminate the ability of an employer to determine whether an employee is permanently or just partially impaired and whether their benefits should continue. “As a result of the court’s decision, employees found by licensed physicians to be just minorly disabled are now likely to head to the courthouse seeking a reinstatement of full disability benefits,” according to Kevin Shivers, executive state director of the federation.

The rate increase, if approved by state regulators, would apply to policies written or renewed after November 1. The proposal is presented in an analysis of the decision’s impact undertaken by the Pennsylvania Compensation Rating Bureau, an independent nonprofit in Philadelphia that helps to set PA workers compensation insurance premiums.

The bureau’s request filed with the Pennsylvania Department of Insurance seeks a 6.06% increase in what is known as the loss cost, which is one of the ingredients used in determining PA workers compensation insurance premiums. Barring any adjustments by individual insurers, premiums should mostly increase by the same 6.06% across the board.

Although the bureau typically files an annual rate request in the spring for policies taking effect April 1, it decided to file a rare interim request following the court decision. “We had to act as soon as we could when it was clear loss costs were inadequate,” according to John Pedrick, Vice President of Actuarial Services for the rating bureau.

“The bureau’s filing applies only to costs going forward”, Pedrick added. “It does not reflect the possibility of past claims being reopened as a result of the court ruling.”

Attorneys specializing in labor and employment law have raised this possibility. People may seek to reopen cases in which their benefits had been curtailed by the IRE process, attorneys have said. If the increase is put into effect, it is possible insurance carriers may seek additional increases if they estimate their costs will rise at an even greater rate.

What’s more, the loss cost increase reflects only higher costs for replacing wages lost due to worker injury and does not account for any changes in medical costs as a result of the court ruling. Those costs could also rise or fall depending on how workers, employers and insurers react to the increase, according to John Pedrick.

Contact us below to learn how this potential rate hike could affect your own PA workers compensation insurance costs.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from a KMRD risk professional before taking any action.